CALGARY – To survive the prolonged downturn in oilfield activity, many energy service companies are poised to cut their dividends to zero.

“Despite two-thirds of our coverage universe having already made sizable dividend cuts in the last year, we believe more are on the horizon within the coming quarters,” CIBC World Markets analyst Jon Morrison said in a research note.

The companies Morrison expects to make further cuts start adding some of the most popular oilfield service companies in Canada, like Precision Drilling Corp., Ensign Energy Services Inc. and Calfrac Well Services Ltd.

Related

Before the oil price rout began, Calfrac paid a 12-cent-per-share quarterly dividend but trimmed that payout to at least one.5 cents per share as West Texas Intermediate oil prices collapsed.

Morrison now expects Calfrac to chop that dividend to zero, and that he downgraded the Calgary-based pressure pumper’s stock to “sector performer” from “sector outperformer.”

Calfrac’s “existing leverage ratios, long-term balance sheet challenges and soon-to-be-vacant CFO chair creates to a lot of headwinds that need to be addressed before we can concentrate on the ‘upside case’ in the equity,” Morrison said.

The rout in oil prices is not kind to fracking companies. Calfrac’s share price has fallen from over $20 per share in the center of 2014 to $1.15 each.